Laredo Petroleum, Inc.

Good day, ladies and gentlemen, and welcome to Laredo Petroleum Inc.' 's fourth quarter 2021 earnings conference call. My name is Shannon, and I will be your operator for today. At this time, all participants are in listen-only mode. We will be conducting a question-and-answer session after the financial and operations report. As a reminder, this conference is being recorded for replay purposes. It is now my pleasure to introduce Mr. Ron Haygood, Vice President of Investor Relations. You may proceed, sir.

Thank you and good morning. Joining me today are Jason Paget, President and Chief Executive Officer, Karen Chandler, Senior Vice President and Chief Operations Officer, and Brian Limmerman, Senior Vice President and Chief Financial Officer, as well as other additional members of our management team. During today's call, we'll be making forward-looking statements. These statements, including those describing our beliefs, goals, expectations, forecasts, and assumptions are intended to be covered by the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Our actual results may differ from these forward-looking statements for a variety of reasons, many of which are beyond our control. In addition, we will be making reference to non-GAAP financial measures. Reconciliations to GAAP financial measures are included in the two press releases and presentation we issued yesterday that detail our financial and operating results for fourth quarter and full year 2021, as well as our 2022 capital budget and outlook. These press releases and presentation can be accessed on our website at www.laredopetro.com. I will now turn the call over to Jason Paget, President and Chief Executive Officer.

Thank you, Ron. Good morning, and thanks for joining us today. We performed exceptionally well in 2021, safely navigating the second year of a global pandemic, capturing important acquisitions that extended our inventory life and making great strides to improve our balance sheet. Our results were quite strong, and our strategy to create future value for our shareholders is well-defined and on track. Our fourth quarter 2021 results were outstanding. Both total and oil production were above the top end of guidance. We generated $25 million of free cash flow and adjusted EBITDA of $182 million. During full year 2021, first, we materially increased our runway of high-return, oil-weighted drilling locations. We were able to identify and capture two significant acquisitions that fit us perfectly, adding more than 40,000 acres in Howard and western Glasgow counties. These deals were accretive to shareholders and deleveraging. These deals initially added about 250 locations, but importantly, recent drilling success has added an additional 125 locations across areas where we ascribed no value at the time of the acquisition. We now have eight years of oil-weighted, high-margin inventory in Howard and Western Glasgow counties. Second, we grew approved oil reserves by nearly 80%, and oil now makes up nearly 40% of our total reserves. The benefits of increased oil reserves paired with the sale of lower-margin gas-weighted assets is apparent in our margins and a 260% increase in the SEC PV10 value. At a WTI price of $75, more reflective of the current environment, we estimate our reserve value would increase by almost $1 billion from the SEC PV10 to approximately $4.6 billion. Third, we significantly improved our capital structure through the reduction of leverage and increased liquidity. We issued $400 million of senior notes at an attractive rate and raised $73 million through the issuance of common stock through our ATM program. Our investments have been disciplined, allowing us to reduce our 4Q annualized net debt to adjusted EBITDA ratio to 1.9 times at year-end 2021, compared to 2.4 times a year ago. Lastly, we continued to demonstrate our commitment to ESG and issued comprehensive ESG and climate risk reports with data through year-end 2020. We established meaningful targets to reduce greenhouse gas and methane emissions, as well as the elimination of routine flaring by 2025. We understand shareholder expectations for our industry, and our board, management team, and other employees are committed to leading the way. We aligned the board oversight responsibilities for ESG and appointed a chief sustainability officer, referring directly to me. Additionally, we included EEO1 data in our 2021 ESG report, providing clarity into the diversity of our workforce. Our 2021 achievements provide a strong foundation for 2022. Yesterday, we issued our outlook for this year, which aligns with our focus on capital-efficient investments, the generation of free cash flow, and the continued strengthening of our balance sheets. Our leverage reduction is six months ahead of previous expectations of year-end 2022, benefiting from higher commodity prices. We are quickly moving toward a time when we will be able to return significant cash to shareholders. We are excited about 2022 and the financial and operating opportunities that we see in front of us. We expect to generate about $300 million in free cash flow in 2022 at the current commodity prices. To put this in perspective, that is about one quarter of our market cap today, And over the next two years, we see the opportunity to deliver free cash flow equivalent to half of our current market cap. We understand the importance of leverage reduction. $300 million of free cash flow is equivalent to about $17 per share. We believe that paying down debt is the most shareholder-friendly initiative that we can deliver today. We expect our leverage ratio will be 1.5 times by the third quarter, and we have line of sight to one times by mid-year 2023. Our capital investments are disciplined and are being allocated to our best opportunities. We are fortunate to have a strong portfolio of high-return oil projects in the U.S.' 's premier oil basin. We are maintaining our capital discipline, keeping activity levels flat from 2021, keeping oil production approximately flat from our Q4 21 exit rate. From the field to the office, our people are dedicated to delivering results that will build value for our shareholders. I will now turn the call over to Karen for an operations update.

Thank you, Jason. Our operations teams executed extremely well in 2021 as we seamlessly integrated two acquisitions, posted strong well results in Howard County, and further extended our oil-weighted inventory with the appraisal of two additional formations. These achievements in 2021 underpin our capital efficient 2022 development plan. In Howard County, we closed the Ceballo deal in July and went to work on new wells that are today among the best performing wells of all of our Howard County packages, driving oil production above the high end of guidance for the fourth quarter. In Western Glasscock County, we completed the 10 well books package at the end of the fourth quarter. Results of the eight wells in the Lower Sprayberry and Wolf Camp A and B formations are benefiting from our optimized completion design and are outperforming the previous package we completed in Western Glasgow County by approximately 38%. These recent acquisitions in Howard and Western Glasgow Counties and our subsequent appraisal activities have extended our oil-weighted inventory runway to approximately eight years at current activity levels, with a break-even oil prices of $55 or below. The slides in our deck have details to help you understand the quality and depth of our inventory in each of our operating areas. As Jason said, our forward development strategy allocates our capital to our highest return projects in Howard County. Returns and efficiencies benefit from the fact that our acreage is contiguous and in many areas we can drill extended laterals. And we plan to drill 18 15,000-foot lateral wells in 2022. Our corporate strategy continues to be focused on leverage reduction. In order to accomplish this, we are maintaining flat activity levels this year as we keep oil production relatively flat and generate strong free cash flows. To optimize our capital efficiency for the year and synchronize our drilling and completion crews, we are currently operating three drilling rigs and two completions crews and plan to release one rig and one crew by the end of the first quarter. After that, we will maintain two rigs and one crew through the end of 2022. Like the rest of the industry, we are impacted by service cost inflation. From fourth quarter actuals, we have factored in approximately 15% inflation into our 2022 capital budget and have locked in much of our pricing for services through the first half of the year, including frack services, sand, and casing costs. We are currently working to extend our service contracts into the second half of 2022 and optimize our inventory management to further de-risk our full-year capital budget from any additional inflationary pressures. I will now turn the call over to Brian for a financial update.

Thank you, Karen. We've made exceptional progress over the last year, both financially and operationally. These accomplishments have allowed us to enter 2022 with strong momentum and confidence in our ability to generate free cash flow, reduce leverage, and position us to return cash to shareholders in the near future. For 2022, we expect to generate about $300 million of free cash flow at current commodity prices, and this cash flow will be directed towards leverage reduction. Turning to our capital budget, our 2022 investment program is approximately $520 million. This plan entails flat activity levels when compared to 2021, offset by industry-wide inflationary pressures in the oil field service cost and higher non-operated activity levels. Our budget also includes ESG-focused investments of about $10 million to work towards the company's achievement of our announced 2025 emissions targets. Our capital is being allocated to our highest return projects and is expected to hold our production flat with fourth quarter 2021 levels. This will generate four-year oil production growth of 24% to 34%. There's no doubt that the recent run in oil price has led to industry-wide inflation and higher costs at the field level. Our people are focused on mitigating higher costs through constant innovation and new efficiency gains. We have locked in a significant portion of our costs for the first half of the year, and as Karen noted, are working towards extending this price certainty into the second half of 2022. To underpin our capital budget and deleveraging goals, we continue to focus on hedging. We have a strong track record of mitigating risk and ensuring strong returns for our capital investments. Our free cash flow and leverage ratio projections are supported by our current hedge positions, covering about 75% of our projected oil production in 2022. We expect minor adjustments to our position throughout this year as we lock in near-term prices to facilitate our leverage reduction goals. For 2023, we have begun building our oil hedge position using collars with floors lined to further our leverage goals and ultimately returning cash to shareholders in 2023. The current hedge volumes for 2023 are heavily weighted towards the front half of the year, giving us more confidence in achieving our leverage goals on the timelines previously messaged. As previously discussed, A&D has been and continues to be a focus for us. Since 2019, we have transformed Laredo through oil-weighted, high-margin acquisitions, adding significant production and locations with higher oil cuts. These transactions accelerated our deleveraging, were accretive to shareholders, and put us in a position to deliver capital to shareholders well ahead of what we would have otherwise been able to do. Our strategy is well defined, and shareholders should expect that any future acquisitions would complement our strategy to return value to shareholders made possible by continuing balance sheet improvement. We will continue to seek opportunities to grow our inventory of high-margin wells to achieve the economies of scale necessary to drive sustainable free cash flow and to reduce volatility in our operations and in our equity performance. I will now turn the call back over to Jason for closing comments.

Before we take your questions, I would like to sum up what our accomplishments in 2021 and really back to 2019 mean. With eight years of high margin oil-weighted inventory, we are now in a position for sustainable, long-term free cash flow generation. This means we believe that we can meet our leverage target of 1.0 times by mid-year 2023 and begin to return capital to shareholders in 2023. While we will continue to look at acquisitions, we can be patient and opportunistic in what transactions we pursue. We have the right team, the right assets, and are excited to come to work every day and deliver on our value creation strategy. Operator, please open the line for questions.

Thank you. To ask a question, you will need to press star 1 on your telephone. To withdraw your question, press the pound key. We ask that you please limit yourself to one question and one follow-up. Our first question comes from Carl Blunden with Goldman Sachs. Your line is open.

Hi, good morning. Thanks so much for the time. I think you did mention that you'd be prudent with regard to M&A. You may have used a different word, but certainly activity has been high generally in the oil patch. Be interested in more of your thoughts around if you were to pursue that, what kind of acquisitions you're looking for now that you've built relatively comfortable inventory position. And then perhaps a layer on top of that, historically you've used some equity funding, you've used some debt funding. Just when you think about how to work with the balance sheet as you continue this transition. Be interested in any thoughts on that.

Great question. I think the future acquisitions would be just held to the similar standard to the deals we've done in the past. They need to be accretive to shareholders, be deleveraging in a short amount of time, and we would, again, anticipate any transaction we would do would accelerate our deleveraging. So that's one of the key principles for it. There's going to be – there's several packages that will be out there this year. I think what we've tried to highlight today, though, is the urgency for doing kind of deals isn't as high because we have built up that inventory. We are focused on, again, using our cash flows to pay down debt. So, again, anything that we would do would be similar in nature to what we've done that have really allowed us to – you know, if we hadn't done those acquisitions we've done before, we wouldn't be in the position we are today to pay – to deliver this type of cash flow and deal effort. more quickly. With respect to the balance sheet and how to fund it, I'll turn it over to Brian.

Thanks, Jason. Yeah, I would just add to that that it will need to be a combination of cash and equity in order to facilitate it both being deleveraging and being accretive to shareholders. And that's the way we've done it in the past. As Jason said, these transactions would be used for us to grow our business, and we still have to finance them in a way that still fits within those two frameworks. So I would expect a balanced approach like we've done on the last two going forward.

That's very helpful. Just looking forward a bit, you did mention the hedges for the first half of 2023. I appreciate that hedging gets tougher and more expensive as you go further out, but as you think about overall how much of the production you'd like to have hedged as you move into this new zone of leverage, if you will, right? So you've delivered pretty substantially and you're looking to deliver more. Is your hedging approach going to change and how much of your volume you'll be hedged? Is that going to change longer term or any color on that would be helpful?

Yeah, I mean, we've put in collars for the first quarter, which allows us to, or early next year, which allows us to, again, protect the downside, but also gives us exposure to the upside. As we deliver and achieve those milestones, you're correct, we don't need to be hedged at the same levels that we do and have in the past. But as we look to start delivering a dividend or return cash to shareholders, we would want to be in a position that we feel confident we can do those, and price fluctuations wouldn't mitigate our ability to deliver cash to shareholders. So we're going to consider all those things, but we will not need to be as hedged at the levels that we are today as we achieve those milestones. But right now, the hedging is focused on allowing us to get there, and so that's why we've got the hedges that we do in place.

Thanks, Jason. Thanks, Brian. Appreciate it. Thank you.

Our next question comes from Derek Whitfield with Stiefel. Your line is open.

Thanks, and good morning, all. Good morning. Good morning. For my first question, I wanted to focus on your preference for allocation of free cash flow over the next couple of years, assuming the leverage reduction targets is noted. How should we think about your preference for return of capital between dividends and share repurchases? And specifically, if your valuation remains depressed as outlined on page six, and it just seems like there's a remarkable buying opportunity of your stock when you can purchase it at a price lower than your PDP value.

Sure. That's obviously a great reason why you would like to have both options on the table. I think where we sit today, I would approach it from a balance using both. It is too early for us to say where we are in the market and where our share prices will be at the time that we get to those deleveraging targets. But I think both of those would be on the table. And as we get below 1.5 and have 1.0 clearly in our sights, will articulate that plan much more clearly.

Great, and for my follow-up, I'd like to shift over to the technical side. Perhaps for Karen, in light of your 2022 operating plan, could you speak to your comfort in drilling and completing 15,000-foot laterals and comment on when you're targeting your first within the 2022 plan?

Yeah, sure. So as we transition the program to North Howard, and really looking at extending those lateral lengths to give us efficiencies in our overall well cost and economics. We mentioned that we've got 18 in the plan for this year, all in Howard County. It's been a couple years since we've drilled 15,000 foot laterals, although we have drilled extended laterals in the past actually quite significantly. In the central Howard area, that acreage position just laid out perfectly for us for 10,000-foot laterals, so that's what we were developing through 2021. But as now we're moving into North Howard, we're really seeing those extended laterals be able to come in and impact our overall economics. Currently, we are finishing a package in Howard County that will have our first 15,000-foot laterals in recent development. Those wells have been drilled, completed, and in the final stages of drilling those out. So overall, from just an operation standpoint, you know, everything's going well on those packages, and we're expecting, you know, the results on a perfect basis, similar to, you know, what we've seen in Howard County.

Great update. Thanks for your time. Thank you.

Our next question, Nicholas Pope with Seaport Research. Your line is open.

Morning, everyone.

Morning, Nick.

I was just kind of curious if you could give a little more detail on kind of the well-cost 10% kind of inflationary pressure you're seeing. I guess with the activity of kind of currently going with the three rigs and dropping one at the end of the at the end of the quarter. I guess how much is kind of locked in? How much have you all already seen versus what's kind of anticipatory on those well costs? I guess try to understand where we are in that whole spectrum.

Yeah, sure. So as we talked about, what we're seeing was fairly significant cost pressures as we move through 4Q and now into early 2022. The supply chain team has worked really hard at really defining where we're locked in, either through fixed contracts or fixed inventory versus where we're potentially still exposed to additional inflationary pressures as we move forward. I mentioned in just my comments that some of our larger components we've got locked in through first half. That includes all refract services. That includes all of our casing. As we've mentioned many times in the past, we are providing our own sand from our own third-party operated sand mine. So we've got that contract in place basically through the rest of the year, which significantly helps us offset additional inflationary pressures in sand, which are quite high right now in the stock market. So overall, when we take a look at everything that we've got kind of locked in, We feel very good about first half, that we're pretty much locked in across the board on cost and can deliver on the capital budget as planned there. As we continue to work into second half, we're really trying to get everything pushed out further and really tighten up third quarter and fourth quarter. So we're doing that currently with areas such as casing and tubing, and we'll just continue to work that through the program for the year.

Got it. That's very helpful. And just real quick, how do you anticipate the split for the year between Glasscock and Howard County on kind of the activity front?

So as we finished up 2021, we brought our second package of Western Glasscock wells, the Brooks wells, which we've referred to and shown some detail in the deck. Those came on right at the end of 4Q. We've transitioned to Howard County and the expectation is all of our remaining completions are run through in Howard County, either Central or North Howard County for 2021 or 2022.

On page 10 in our deck, if you have access to that online, we've put in the top right, there's a graph that just shows where all the tills are coming from. So we've got some wells coming in from Central Howard, but then it all transitions to North Howard.

Got it.

That's very helpful.

That's all I have. Thanks, guys. Thank you.

Our next question comes from Eric Seas with Golden Tree. Your line is open.

Hey, guys. Thanks for the call and for the slides. They give a lot of good transparency. We appreciate that. On slide 10, you guys in the upper left-hand quadrant, you guys show your CAPEX by category. I was hoping you could give us a little bit more color on the facilities and land CapEx and the corporate CapEx. If you could break out facilities versus land, that would be – or just because of the rough sense, that would be appreciated. And if you could give us a little bit more color on, you know, what corporate CapEx is. And for both of these categories, are the amounts you're spending in 22, are they sort of normal going forward, or are they elevated for any reason this year? Thanks.

Yeah, so I can comment, will comment on the facilities and land components and then also will point out there, you know, we're starting to work in our non-op activities so that you can see that split out as well. So from the facilities and land, I mean, this is a category that we, you know, report out on detail and I think we have them split out for all of our 4Q and 2021 spend in the release. Pretty much the, we run at about a 15% on our DC and E. for spend on facilities, land, LMS. And so this is pretty much in line with that. We did call out in the release that, you know, we've got $10 million in here for facilities retrofits and just the work that we're doing that we've highlighted in the deck on ESG. So that would also be in that component.

And then on the corporate side, that is predominantly capitalized interest and G&A. And if you look at this on a historical perspective of the percent of budget that's allocated to DC&E and then what we've just kind of traditionally called other, it's very much in line with past years with DC&E representing approximately 85% of the total budget, and that's very much in line. We just gave a little bit more granularity this time around in the breakout.

Okay, terrific. Thanks, guys. I appreciate the presentation and congratulations on strong results. Thanks, Eric.

Our next question comes from Greg Brody with Bank of America. Your line is open.

Good morning, guys. I'll second Eric's comments of presentation and pledge are very helpful and very well done. Thank you. Just I was looking at page seven, and you mentioned this in your press release, and on the holiday, how you're going to your near term development focus is going to be on the on the what looks to be the 40 to 40 to $45 breakeven opportunities in your inventory. How do you think about stepping out to approach the 50 to 55 that are still very good in today's environment? And why not do some of that now when we're in this environment?

That's a great question. Again, if you put through the spreadsheet, your biggest benefit is drilling your best wells first. If you look at that lowest bucket, you see more of that is in Howard County than it is western Glasscock. That's the plan for us is to drill our best stuff first. It's generating the most cash flow in the highest price environments. That's what allows us to delever at the rate we're able to delever because those Howard wells are so strong. So there is a risk, as you mentioned, if prices collapse, you may not get to the wells that are in those higher buckets. But right now, we've got a lot of cushion. So that's how we allocate is drill the best stuff first. We are excited about the new tests that open up additional wells in Howard County. We highlighted the Middle Sprayberry, those wells are new, but they're both really strong and have achieved almost 900 barrels a day and are much flatter decline profile so far. And so those are separated by 700 feet of rock. So we have an opportunity for those Middle Sprayberry wells to either co-develop or we believe come back and develop them later, which allows us to reuse the facilities or not have to build facilities for those wells when they're at their IP. So that may be the most efficient development option for us. It's also, these are the easternmost wells that we kind of see in the Middle Sprayberry so far. So there is further delineation that can be done to help prove it up, more Middle Sprayberry wells in Howard County. So I'd say that's how we focus it. And then, again, something new for this presentation as well as, you know, we do, we broke it into the three groups. Howard, Western Glasscock, and Eastern. There are wells in the Eastern that the team has looked at that don't require a whole lot of work to really get them drill schedule ready. Those are things that you might think through a drill fund or something like that at some point to accelerate the value of those in this price environment. But again, we start including those. We've built out to almost 11 years worth of inventory at a $55 breakeven or less. So that was a lot of words, but hopefully it gives you some character, but it's, it's really drilling our best dealt stuff first accelerates our deleveraging is how we think about it.

And that's, and that's very helpful. And you, you kind of covered some additional questions I have there. Um, so is it the, it's the hope that some of the, some of the higher cost inventory becomes lower as you can drill longer potentially in those areas or, um, And then also, you can go there. And then I'll just add to that. The Eastern Legacy stuff, I was going to ask you about that. There is, is there some capital allocated this year? And you mentioned maybe, I think I heard you say a joke. Is that something that we could actually see this year?

We haven't really talked a lot about it, but it's just something that we We think about ways to create or accelerate value out there. It's a higher cost of capital to do those things, but it's an option. What's interesting as we think through these wells, there are 5,000-foot wells out there, 5,000-foot laterals. We really debate a lot on do you include them, not include them, because you could own 50% of a 10,000-foot well, but you've got to go get the deal signed to own that 50% of a 10,000 or farm into somebody else or get them to sell it to you. So I think there's more, even more. If you looked at an inverse report or something like that, they have even more inventory than we highlight here, but they require some deals. And because those are at the back of the schedule, we're not working on those like we do getting Howard County rigged schedule prepped and ready to go.

And just two more for you here, if you don't mind. You noticed that on your balance sheet, your accrued CapEx and your undistributed revenues and royalties increased a bit over the previous quarter. Should we expect a negative working capital flow this year? And is that in some of the guidance you've given?

Yeah, I mean, I would expect it to fluctuate as prices go up, but we do capture that, yes.

And then, last one. Excuse me, guys. My kid just walked in the room, so I apologize if you hear him. But my last question for you is just debt reduction. You talked about doing it this year. Clearly, I think if you dedicate all your free cash flow to pay out the credit facility, you would have excess cash flow to maybe reduce your total quantum of senior debt. Is that... Is that something you're thinking about today, or is it – obviously, if you participate in M&A, that may change that, but I'm just curious what your current thoughts are. And maybe the nine and a half to 25, is that something you would maybe consider paying down some before you can refinance? If you didn't say you could refinance it today.

Yeah, so we'll, you know, throughout this year and next year, we'll constantly be looking at all liability management options. I am more focused on paying it off than I am extending it. You know, so it's callable now at one rate. It's callable next January at a lower rate. A lot of our cash bill is in the back half of the year, and so we'll just really have to see where things are. If I'm able to get some of those back this year at a rate that makes sense and is accretive to the company, it's clearly something we would do. It's not my goal to stack cash on the balance sheet and have senior notes outstanding. So it's just managing through that process. You know, and everything can change from this month to next month on the best ways to do that. But it's something that we're constantly evaluating and monitoring the different options we have. But that is our focus through this year.

Great. Thank you very much, guys. Thank you.

Our next question is a follow-up from Eric C. with Gold Entry. Your line is open.

Hey, guys. Greg just asked my question. The final one for me is just on hedging. It sounds like you don't believe you have to hedge as much in 23 as you did in 22, given you expect to make some progress on the balance sheet. Can you just maybe give us some sort of ballpark sense of parameters of what you're thinking about?

Yeah. Again, we will continue to layer on some hedges. Again, we have traditionally been, again, 75% hedged as we enter a year, kind of like we are this year. So we're watching commodity prices. Again, we've favored these wider collars with bigger spreads, just because if the oil price should fall, again, it protects us and we don't lose the progress that we've gained. So we'll continue to look at those. Again, we are favoring the first half of 2023 versus the full year. So it's a decision that we look at and talk about. We don't give specific parameters on we're going to be 50% hedge, but I'd say it's more likely to be 50% for a hedge than 75. But again, we're going to just continue to monitor prices, see how things go. Again, we don't want to lose the ground we've gained on leverage reduction. and so we will kind of put those hedges in so that once we get to those points, we have more flexibility, but we're not there yet. We haven't achieved the 1.5 yet, so we've got to get to 1.5 before we can start kind of reducing our hedging activity, I guess, is the way to think about it.

Thanks, and I guess one of the problems with setting a leverage target in a $90 barrel oil price environment is, you know, what might look like prudent leverage at this point in the cycle might not look like prudent leverage at another point in the cycle. Do you have other metrics that you're keeping an eye on with respect to your target leverage balance?

Well, I'd say long-term, my goal would be to get us, if we're in this type of price environment, below one times. I think of a $1.00 in that $55 to $60 price range is ideal, but we have to get there first. Like Jason said, we're in such a substantially different place than we were a year ago because of price and because of the steps we took. It's easy for us to look forward and say, we've got 1.0, we're there, but we're not. Until we get to 1.5, until we get to 1.0, we've got to keep our heads down. But Our goal would be to be below 1.0 at a price environment like this and target a 1.0 in that $55 to $60 range. And that's obviously easier said than done on a smaller company, but that's where we're heading. That's our focus.

Thanks, guys. I appreciate the call.

Thank you. And this concludes the question and answer session. I will now turn the call back over to Ron Haygood for closing remarks.

We appreciate your interest in Laredo. Thanks for joining us for our call this morning. And this concludes the call. Thank you.

This concludes today's conference call. Thank you for participating. You may now disconnect.